Q2 2026 Far Eastone Telecommunications Co Ltd Earnings Call

August 6, 2026

Operator: Welcome everyone to Far Eastone's 2026 Q2 earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. For your information, a webcast replay will be available within an hour after the conference has finished. Please visit www.fareastone.com.tw under the investor relations section. Now I would like to introduce Mr. Gary Lai, the IR officer. Thank you. Gary, please begin.

Speaker #1: Welcome, everyone, to the Far Eastone 2026 second quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session.

Speaker #1: Please follow the instructions given at the time. If you would like to ask a question, and for your information, a webcast replay will be available within an hour after the conference has finished.

Speaker #1: Please visit www.fareastone.com.tw. Under the Investor Relations section, I would now like to introduce Mr. Gary Lai, the IR Officer. Thank you. Gary, please begin.

Gary Lai: Good afternoon, everyone, and welcome to Far Eastone 2026 Q2 investor conference call. We have with us today our President, Chee, and CFO, Sharon. Both will share updates and performance for the quarter. Before we begin, I would like to remind everyone to pay close attention to the safe harbor statement on the first page of the presentation. Thank you. Now let's proceed with Chee's presentation. Thank you.

Speaker #2: Good afternoon, everyone. And welcome to Far Eastone 2026, second quarter investor conference call. We have with us today our President Chee and CFO Sharon, both will share updates and performance for the quarter.

Speaker #2: Before we begin, I would like to remind everyone to pay close attention to the safe harbor statement on the first page of the presentation.

Speaker #2: Thank you, and now let's proceed with Chee's presentation. Thank you.

Chee Ching: Okay. Thank you, Gary. Good afternoon, everyone. I would like to first look at our Q2 financial performance. As you could tell, we actually have achieved a record-breaking performance, with all KPIs exceeding our guidance. Our total revenue came to TWD 28.66 billion and EBITDA is TWD 10.15. For the revenue, we are looking at a 13.6% increase YOY. Just to clarify, because, for the base last year, we have not consolidated with our subsidiary at ETC. If we restate the base for last year, that is showing in the central column here. The restated 2025 Q2, our total revenue was TWD 26.11. If we include the ETC Q2 revenue, the YOY, this is the apple-for-apple kind of comparison. The YOY became 9.8%. Okay. Similarly for every other KPIs, you can look at them yourself.

Speaker #3: Great. Thank you, Gary. Good afternoon, everyone. So I would like to first look at our second quarter financial performance. As you could tell, we actually have achieved a record-breaking performance with all KPIs exceeding our guidance.

Speaker #3: So our total revenue came to $28.66 billion, and EBITDA is $10.15. For the revenue and we are looking at a $13.6% increase while just to clarify, because for the base last year, we have not consolidated with our subsidiary FETC, so if we restate the base for last year, and that is showing in the central column here.

Speaker #3: So, the restated 2025 second quarter—our total revenue was $26.11 billion if we included ETC's second quarter revenue. Then the year-over-year, so this is an apple-to-apple kind of comparison.

Speaker #3: The YOY became $9.8%. Okay. So similarly, for every other KPIs, you can kind of look at them yourselves. So for the net income, if we reach $4.01, this is actually a record high net income performance for the second quarter.

Chee Ching: For the net income, we reached TWD 4.01. This is actually a record high net income performance for the Q2, our EPS came to TWD 1.11. For our guidance, you can look at from the far right, it says TWD 0.94. We are certainly exceeded our guidance for now. Okay. If we combine the two quarters for the H1, we delivered growth above our guidelines, also from the YOY perspective, it is also looking very good. Our combined revenue came to TWD 56.47 billion, our EPS came to TWD 2.14. For the net income, it says TWD 7.72, if you look at the YOY, it's even in the double digits for operating income, net income, and also EPS. Compared to our H1 guidance, the EPS is TWD 1.89. That was the target, we now have TWD 2.14.

Speaker #3: And our EPS came to $1.11. For our guidance, as you can see on the far right, it's $0.94. So we have certainly exceeded our guidance for now.

Speaker #3: Okay. And then if we combine the two quarters, for the first half, we also delivered growth above our guidelines, and from the year-over-year perspective, it is also looking very good.

Speaker #3: So our combined revenue came to $56.447 billion, and our EPS came to $2.14. For net income, it was $7.72 billion. If you look at the year-over-year change, it's even in the double digits for operating income, net income, and also EPS.

Speaker #3: And compared to our first half guidance, the EPS was $1.89—that was the target. And now we have $2.14, so it's looking pretty good that we exceeded our guidance. We expect to continue to do well for the second half.

Chee Ching: It's looking pretty good that we exceeded our guidance, and we expect to continue to do well for the H2. The investors should be happy with that. If we look at the trend for the quarterly performance, you can tell in terms of the total revenue, EBITDA, net income, and EPS, each of the performance here has reached a record high. For the Q2 revenues, that's of all the Q2 in history, the highest. For EBITDA, as you can see, actually, since starting in the Q1 of this year, our EBITDA has climbed up to the TWD 10 billion level, and continue to go up a little bit. We like to stay at this TWD 100 level, and hopefully we'll get better.

Speaker #3: So the investors should be happy with that. Okay. Now, if we look at the trend for the quarterly performance, you can see the total revenue, EBITDA, and net income, and then also the EPS.

Speaker #3: Each of the performance here has reached the record high. For the second quarter revenue, that's all the second quarter in history, the highest. And then for EBITDA, as you can see, actually, since starting in the first quarter this year, our EBITDA has kind of a climb up to the $10 billion level.

Speaker #3: And then continue to go up a little bit. So we like to stay at this $100 level. And then hopefully we'll get better. And then this is our highest quarterly performance across all quarters.

Chee Ching: This is our highest quarterly performance across all quarters for the history. In terms of the net income, it is TWD 4.01. It's the highest quarter. In terms of the EPS, that's also the highest for the history. In some financial metrics, our net debt, we have reduced it to the TWD 32.8 billion level, and the net debt to EBITDA improved to 0.83x multiple. Our year-to-date free cash flow remained really strong at TWD 14.5 billion. Our CapEx for TWD 3.0 billion, it remains in line with our four-year guidance of TWD 9.6 billion. For the combined H1 trend, this is also record-breaking for all areas. For total revenue, operating income, EBITDA, and EPS.

Speaker #3: For the history, okay, in terms of the net income, it is $4.01. It's the highest quarter. And then also, in terms of the EPS, that's also the highest.

Speaker #3: For the history, okay. All right. And some financial metrics: our net debt—we have reduced it to the $32.8 billion level, and the net debt to EBITDA improved to a 0.83 multiple.

Speaker #3: Our year-to-date free cash flow remained really strong at $14.5 billion. Also, our CapEx of $3.0 billion remains in line with our four-year guidance of $9.6 billion.

Speaker #3: Okay. All right. So for the combined half-year trend, this is also record-breaking in all four areas, for both total revenue and operating income.

Speaker #3: And then also EBITDA and EPS. Okay, all right. And that was also the slide I actually showed to my chairman when he came to the board meeting today.

Chee Ching: That was also the slide actually I showed to my chairman when he came to the board meeting today. In terms of the key drivers for our revenue growth, here is a breakdown. You can see for the red area, that is our combined mobile and essential services, which accounts for 50% of our total revenue, and showing a 2.4% growth. Merchandise, percent-wise, still 30%, the YOY is 11%. Actually, our merchandise in this quarter actually performs really well. On the other hand, merchandise margin is a little bit smaller. If you notice in the previous chart, we actually compare the margin. Our margin rate wise compared to the same quarter last year, not as good, it's just the portfolio changed a little bit.

Speaker #3: Okay, okay. And then, in terms of the key drivers for our revenue growth, here is a breakdown. You can see, for the red area, that is our combined mobile and essential services.

Speaker #3: Which accounts for 50% of our total revenue, and then showing a 2.4% growth. Merchandise, percent-wise, is still 30%, but the year-over-year is 11%.

Speaker #3: So actually, our merchandise in the first quarter actually performed really well. But then, on the other hand, merchandise margin is a little bit smaller.

Speaker #3: So if you notice in the previous chart, we actually compared the margins. So our margin rate-wise, compared to the same quarter last year, is not as good, but then it's just the portfolio kind of changed a little bit, and merchandise has a bigger weight.

Chee Ching: Merchandise has a bigger weight in terms of their growth, it's stronger. In terms of ICT plus the fixed business, we grew 32.7% there. That includes the ETC's ICT revenue. In overall that is our portfolio. Some of the drivers in the mobile area, of course, our steady continued 4G to 5G migration. For the fee uplift for those 5G renews, we are looking at 40 point some % uplift. It's a very good performance, very good quality migration. We manage the churn very effectively. Our essential services, although relatively small compared to the mobile service core base, it's showing a good potential and good growth potential. A lot of them are in double-digit growth, like entertainment for 29% YOY.

Speaker #3: And in terms of their growth, it's stronger. Okay. And in terms of ICT plus the fixed business, we grew 32.7% there.

Speaker #3: Then that includes the ETCs, ICT revenue. So in overall, that is kind of our portfolio. And some of the drivers in the mobile area, of course, our steady continued 40 to 50 migration.

Speaker #3: And then for the monthly, pre-up for the fee uplift for those 5G renews, we are looking at a 40-point-some-percent uplift. So it's a very good performance, very good quality migration.

Speaker #3: And then also, we manage the churns very effectively. And then our essential services, although relatively small compared to the mobile service core base, are showing good potential and good growth.

Speaker #3: So a lot of them are in the double digit growth, like entertainment. For 29% year over year. And also, our fraud retention prevention features is showing a 56% increase.

Chee Ching: Also our fraud prevention features, it is showing a 56% increase. Our mobile financial service that has been around for a while, still continues this 8% year-over-year growth. Okay, very steady. Merchandise, we see the upgrades, that definitely is the driver. I think some of the price is increasing, I think that places some uncertainty and then gives some pull for the users to want to get the new phone sooner. We also see some of that purchase going on as well. That all helps the merchandise growth here. Okay. Merchandise also includes our shopping here. We actually have done some online, offline, online merger with offline. We see that very effective, the two channels combined strategy. It was well executed. Okay. For the ICT and the fixed business area, our ICT revenue increased 23%.

Speaker #3: Our mobile financial service has been around for a while, but it still continues this 8% year-over-year growth. Okay. Very steady. And then, for merchandise, we see the upgrades.

Speaker #3: That definitely is the driver. And I think some of the price is increasing. I think that places some uncertainty and then gives some pull for the users to want to get the new phone sooner.

Speaker #3: So we. Also see some of that purchase going on as well. So that all helps the merchandise growth here. Okay. And then merchandise also includes our shopping here.

Speaker #3: So, we actually have done some online, offline, and online merger with offline. So, we see that as very effective—the two channels, kind of a combined strategy.

Speaker #3: It was well executed. Okay. For the ICT and the fixed business area, our ICT revenue increased 23%. This 23% doesn't include the ETC area; it's just our own core ICT revenue.

Chee Ching: This 23% doesn't include ETC area, just pure our own core ICT revenue. This is driven by the cloud. Our subsidiary, Nextlink, they have a very good cloud growth, and due to that, they have a new acquisition of a Vietnam cloud service company. It shows a 30%, and also that subsidiary also outperforms their own estimate, their BOD target. In these four ICT concentration areas that we particularly see Smart City performs very well, and it is YOY, they kind of double their revenue for the H1 of the year. We had some acquisition earlier this year with the subsidiary, we actually seeing the contribution there as well. Okay. FETC, as a new subsidiary to us, they have a very solid business growth for their toll collection, and also some derivatives of business such as parking related.

Speaker #3: And then this is driven by the cloud. Our subsidiary, NexLink, has very good cloud growth, and due to that, they have made a new acquisition of a Vietnam cloud service company.

Speaker #3: So it shows a 30%. And then also, that subsidiary also outperforms their own estimate, their BOD target. And in these four ICT concentration areas, that we particularly see smart city performs very well.

Speaker #3: And then, year-over-year, they kind of doubled the revenue for the first half of the year. And then we had some acquisitions earlier this year with the subsidiary.

Speaker #3: So, we are actually seeing the contribution there as well. Okay. And then FETC, as a new subsidiary to us, has very solid business growth for their toll collection.

Speaker #3: And then also, some derivatives business, such as parking-related. And then for their international expansion with the ICT kind of projects, based on the toll collection kind of a construction, it is also going very well.

Chee Ching: For their international expansion with the ICT kind of project based on the toll collection, kind of a construction, it is also going very well, and that contribute to their growth very well. Okay. Some highlights for our mobile business. As I mentioned earlier, we have seen the continued 5G upgrade, and we have very strong MNP momentum. The Mobile Number Portability, right? Mobile Number Portability. Right. In terms of our MNP performance that we actually looked at every month, we are doing very well there. You look at our service revenue, it increased 3%, and our ARPU continues to lead our peers. It comes to TWD 733, although still lower than what we had before the merger with APT, but it is getting close.

Speaker #3: And that contributes to their growth very well. Okay. All right. And some highlights for our mobile business. As I mentioned earlier, we've seen the continued 5G upgrades, and in our half, we have very strong MP momentum—the number portability, right?

Speaker #3: Neutral for number portability. Member portability, right? So in terms of our MP performance that we actually looked at every month, we are doing very well there.

Speaker #3: So, if you look at our service revenue, it increased 3%. Our pull continues to lead our peers. It comes to 733, although still lower than what we had before the merger with APT.

Speaker #3: But getting close but still, there's some I think we were like at a 758. So we definitely are climbing back, but then there's still some distance there.

Chee Ching: Still, there is some I think we were like at TWD 758, we definitely are climbing back, there is still some distance there. Okay. In terms of our post-paid 5G penetration, it is now 49.3%. This is the total base of the post-paid. If we look at only the smartphone users for the 5G penetration, then this number would come to 53 or so. Yeah. Okay? We look at the whole base, it is still at 49.3%. My team still owes me a little bit more there, we definitely will break the 50% mark this year. Okay. The churn rate continues to come down, it is reaching the record low, we will continue to manage it down. Okay. Some highlights for our consumer service. We have launched actually one major application that is called Taste Taiwan.

Speaker #3: Okay. In terms of our post-pay 5G penetration, it is now 49.3%. This is for the total base of the post-pays. If we look at only the smartphone users, for their 5G penetration, then this number would come to about 53% or so.

Speaker #3: Yeah, okay. But then we look at the whole base, so it is still at 49.3. So my team still owes me a little bit more there.

Speaker #3: But we definitely will break the 50% mark this year. Okay. And then the churn rate continues to come down, and it is reaching a record low, but we will continue to manage it down.

Speaker #3: Okay. Some highlights for our consumer service—we have actually launched one major application called Taste Taiwan. It's a new app. It's a one-stop kind of dining service app.

Chee Ching: It's a new app. It's a one-stop kind of dining service app. We already have attracted over 250,000 users by now. It is growing as well as we expected. In terms of another app that we didn't launch, but it is a service we put on our FET Mobile Circle, kind of using our digital reach, and partner with adjoe, that's a gaming platform. Our users that can play to earn, and this actually, it is what I see as a very typical and a good example of a platform economy. It's really a platform monetization. This is actually generating revenue every month with a good growth as we speak. Okay. In terms of the entertainment business for our friDay Video, our paid subscription base has grown 20% YoY this year. Also revenue-wise, it's a 17%. Okay.

Speaker #3: We already have attracted over 250K 250,000 users by now. And then so this is it is growing as well as we expected. And then in terms of another APP that we didn't launch, but it is a service we put on our mobile circle kind of using our digital reach.

Speaker #3: And partner with Edro. That's a gaming platform. So our users that can play to earn and this actually it is what I see as a very typical and a good example of a platform economy.

Speaker #3: It's really a platform monetization. So this is actually generating revenue every month very with a good growth, as we speak. Okay. And then in terms of the entertainment business, for our Friday video, our subscriptions paid subscription base has grown 20%.

Speaker #3: Year-over-year this year, and then also revenue-wise, it's 17%. Okay. And then, we continue to expand FET's footprint in the entertainment ecosystem and the IP content-related areas.

Chee Ching: We continue to expand our FET's footprint in the entertainment ecosystem and the IP content related. The users right now should see more kind of voice of Far Eastone in this area. We have some, like an ID. Music Festival, and that is partner with Spotify. As I was told, that is like a first in how many years that Spotify did that with any of the local companies here. Okay. For the new mobile product, we launched 5G FWA, plus the home entertainment kind of package in April. We are also seeing a very good response from the market, and it is exceeding our target by 23% for this quarter. Okay. We launch another product that is a mobile product that is different than our typical X99 kind of pricing. This is with the segment focus.

Speaker #3: So the users of ours should see more and more of the voice of Far Eastone in this area. And we have some, like, an ID music festival that is partnered with Spotify.

Speaker #3: As I was told, that is the first time in many years that Spotify has done that with any of the mobile companies here. Okay.

Speaker #3: And then for the new mobile products, so we launched 5G FWA and then plus the home entertainment kind of package in April. We are also seeing a very good response from the market.

Speaker #3: And it is exceeding our target by 23% for this quarter. Okay. And then we launched another product, which is the mobile product. That is different from our typical X99 kind of pricing.

Speaker #3: This segment is focused on the second-man approach. This is a young segment, which we call 'Useful Companions.' It is targeted at Gen Z.

Chee Ching: This is a young segment. We call it Useful Companion, it is targeted at Gen Z. 33% of our new subscribers came from this younger segment. Okay. Fraud prevention, I think I mentioned it earlier, the paid subscription grew 44%. Okay. This is with, we continue to work with the vendor for the AI-enhanced capability. They continue to improve that, and also that helps the adoption as well. Just for reference, this is no money, but we blocked over 200 million attempted visits at those unsafe websites, what we consider as blacklisted, for the subscribers of the service in Q2 alone. It is definitely doing its service. Okay. All right. In the ICT area, our ICT revenue grew 23% in H1. In terms of the contract value, we actually grew 103%.

Speaker #3: So, 33% of our new subscribers came from this younger segment. Okay. And then, fraud prevention— I think I mentioned it earlier. The paid subscriptions grew 44%.

Speaker #3: Okay. And then this is with we continue to work with the vendor for the AI enhanced capabilities. So they continue to improve that. And also that helped the adoption as well.

Speaker #3: And then just for reference, this is no money, but we blocked over 200 million attempted visits at those unsafe websites. What we consider as a blacklisted for the subscribe for the subscribers of the service in second quarter alone.

Speaker #3: So, it is definitely doing its service. Okay, all right. In the ICT area, our ICT revenue grew 23% in the first half, and in terms of the contract value, we actually grew 103%.

Speaker #3: So it's like a double—double what we had last year for the first half. And then, in particular, for smart campus and the smart city area, we see a very strong growth there of 46%.

Chee Ching: It's like double what we had the last year for H1. In particular, in the Smart City area, that we see a very strong growth there for 46%, and some big projects that we have gone from several cities, and that definitely helps. Also for the Smart Health, the smart healthcare, although the base is relatively small, but this is definitely one area it is growing, slowly but surely. Our telemedicine contract has grown 76% YoY. Also the smart hospital solutions is growing 114% YoY. We also have some big wins. Even though Smart Health base is small, it is definitely growing with a very solid wins. Okay. In terms of digital transformation, that mainly is driven by the demand for AI, which then drives the demand for cloud.

Speaker #3: And some big projects that we have gotten from several cities, and that definitely helps. And then also, for smart health, smart healthcare, although the base is relatively small, this is definitely one area that is growing.

Speaker #3: Slowly but surely. And then our telemedicine contract has grown 76% year over year. Also, the Smart Hospital Solutions is growing 114% year over year. And we also have some big wins.

Speaker #3: And that so even though smart health base is small, it is definitely growing very with a very solid some wins. Okay. In terms of digital transformation, that mainly is driven by the demand for AI.

Speaker #3: And then which then drive the demand for cloud. So we have seen that trend since like two years ago. And then it just continues.

Chee Ching: We have seen that trend since 2 years ago, it just continues, even stronger. For the first year in our digital transformation service area, that already we are seeing 50% YoY revenue growth. Also the contract value that we have accumulated in the H1 already surpassed the full year 2025 total. A few big wins, in terms of central government, we have one particular central government ministry cloud migration project, also two with the leading global Taiwan-based electronics and cloud infrastructure company. Those are big wins for us as well. For telecom-based SI, we have several multiple large-scale telecom SI, we have secured them, across transportation and smart infrastructure areas. Major wins including Taiwan Railway and also a leading technology company. That is the BOT project, the smart building related.

Speaker #3: And then even stronger. So, for the first year in our digital transformation service area, we are already seeing 50% year-over-year revenue growth. Also, the contract value that we have accumulated in the first half has already surpassed the full-year 2025 total.

Speaker #3: A few big wins in terms in terms of central government, we have one particular central government ministry called migration project. And then also two with the leading global Taiwan-based electronics and cloud infrastructure companies.

Speaker #3: So those are kind of big wins for us as well. And for telecom-based SI, we have several multiple large-scale telecom SI we have to cure them.

Speaker #3: Across transportation and smart infrastructure areas, there were major wins, including Taiwan Railways and also a leading technology company. That is a BOT project, and then the smart building related.

Speaker #3: And also, there is a government agency training center that's also smart building-related that we have got a contract for. And some major honors and recognitions, for your information only.

Chee Ching: Also there is a government agency training center that's also smart building related that we have got the contract. Some major honors and recognitions for your information only. We have earned the BSI Data Center Mark of Trust. As we were informed, this is the first IDC operator worldwide that is recognized for excellence in IT service management. We took pride in that. Also we are Taiwan's Best Customer Service Golden Award. We won it for the 15th consecutive time, and that's the only company in Taiwan to achieve this distinction. Okay. We have some environmental sustainability that is recognized, also some corporate governance leadership related awards for your information there. I just won't go over them one by one. Okay.

Speaker #3: So we have earned the BXI data center mark of trust. And then as I was as we were informed, this is the first IDC operator worldwide that is recognized for excellence in the IT service management.

Speaker #3: So we took pride in that. And also we are Taiwan's best customer service golden award. We won it for the 15th consecutive time. And that's the only one only company in Taiwan to achieve this distinction.

Speaker #3: Okay. And then we have some environmental sustainability that is recognized, and also some corporate governance and leadership-related awards for your information there.

Speaker #3: I just won't go over them one by one. Okay. Finally, for our second half priorities, so we will continue to accelerate the growth in the consumer essential services.

Chee Ching: Finally, for our H2 priorities, we will continue to accelerate the growth in the consumer essential services. As I say, that's where I see our potential growth is. Also ensure the timely delivery of the smart ICT projects. What the numbers may not show, even though we're already seeing ICT with a 23% YoY revenue increase, we do have some projects that didn't complete as per our original schedule. Those revenue will be realized in the next quarter or so. Some of the revenue, otherwise, if they completed as originally estimated, our ICT revenue would be even higher. Okay. Ensure timely delivery of these smart ICT projects will be our priority as well. The pipeline actually is long.

Speaker #3: As I say, that's where I see our potential growth is. And then also ensure the timely delivery of the smart ICT projects. What the numbers may not show, even though we already seeing an ICT with a 23% YOY revenue increase, but then we do have some project that didn't complete as per our original schedule.

Speaker #3: So those revenue will be realized in the next quarter or so. So some of the revenue otherwise, if they completed as originally estimated, our ICT revenue would be even higher.

Speaker #3: Okay. So ensuring the timely delivery of these smart ICT projects will be our priority as well. And then, actually, our pipeline is quite long.

Speaker #3: So, those AI projects were delivered, and then, as I mentioned, that was really driven by enterprise interest and demand, which also drives the demand for cloud.

Chee Ching: Those AI projects delivery, as I mentioned, that was really driven by the enterprise interest and demand, which also drives the demand for cloud. Together, our delivery capacity and capability will continue to build up this team just in response to this high demand. Okay. We have started our 5G standalone deployment, we'll continue to advance that. Per our schedule and also LEO satellite service readiness, we already have the kickoff meeting with Amazon in July, we have formed several work streams. The work continues. Okay. All right, with that, I concluded my presentation and ready for your questions. Thank you.

Speaker #3: So together, our delivery capacity and capability will continue to build up this team, just in response to this high demand. Okay. And then we have started our 5G standalone deployment.

Speaker #3: So we'll continue to advance that, per our schedule. And also, for LEO satellite service readiness, we already had the kickoff meeting with Amazon in July.

Speaker #3: And then we have formed several workstreams, so the work continues. Okay, all right. And then with that, I conclude my presentation and am ready for your questions.

Speaker #3: Thank you.

Speaker #1: Yes. Thank you, President Chi, for the presentation. And ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press the star key and number one on your telephone keypad.

Operator: Yes. Thank you, President Chi, for the presentation. Ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it's your turn to speak, you may press star key and number two to cancel the question. Thank you. Our first question will be coming from Ranjan Sharma, J.P. Morgan. Go ahead, please.

Speaker #1: And you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it's your turn to speak, you may press the star key and the number two to cancel the question.

Speaker #1: Thank you. Our first question will be coming from Ranjan Sharma, JP Morgan, go ahead please.

Speaker #3: Hi, good evening, management. Thank you for the presentation and the opportunity. I have one question. On the advanced 5G standalone deployment, what is the benefit that you're seeing of standalone versus non-standalone 5G?

Ranjan Sharma: Hi. Good evening, management. Thank you for the presentation and the opportunity. I have one question. On the advanced 5G stand-alone deployment, what is the benefit that you're seeing of stand-alone versus non-stand-alone 5G, and how much capital are you looking to deploy? If there's any numbers you can share on IRR of these investments, it will be very helpful. Thank you.

Speaker #3: And how much capitalization are you looking to deploy? And if there are any numbers you can share on IRR of these investments, it would be very helpful.

Speaker #3: Thank you.

Chee Ching: If I'm not mistaken, I believe you asked the same question last time. Okay. For 5G SA, we look at it as a technology evolution and also a must-do on the way to be ready for 6G. Also on the other hand, with the 5G deployment, 5G SA will unleash some of these unique capabilities for enterprise applications. We are kind of fall short if we don't complete that part. We have looked at several different scenarios, in both the consumer and enterprise areas. While my NT team is working hard on the deployment and all that, my business team are also working with the NT team to familiarize themselves with these features that are going to be available when, so they can design their product or service accordingly.

Speaker #2: If I'm not mistaken, I believe you asked the same question last time. Okay. So, for 5G SA, we look at it as a technology evolution.

Speaker #2: And then also a must-do on the way to be ready for 6G. And then also on the other hand, with the 5G deployment, 5G SA is like it will unleash some of these unique capabilities for enterprise applications.

Speaker #2: So we are kind of fell short if we don't complete that part. So we have looked at several different scenarios. In both the consumer and enterprise areas, so while my NT team is working hard on the deployments and all that, and my business team are also working with the NT team to familiarize themselves with these features that are going to be available when and then so they can design their product or service accordingly.

Speaker #2: So, we definitely see the monetization opportunities there. And also on top of that, part of these capital investments will also help us to further improve the penetration into the home.

Chee Ching: We definitely see the monetization opportunities there, and also on top of it. Part of these capital investment will also help us to further improve the penetration into the home, because the 5G alone with the 5G SA and also what we are doing with the 700 spectrum area. All these are kind of investment together in terms of our NT deployment that is going on right now. In terms of the network quality, network performance, and also the potential of the future monetization opportunities for both consumer and enterprise. That's why we are doing it. In terms of, I think you asked about the scale, probably. I think we are looking at more than 50% of the coverage that we should be able to complete at by the end of the year in terms of having 5G SA deployed.

Speaker #2: Because of 5G alone, with 5G SA, and also what we are doing with the 700 spectrum areas. So all these are kind of investments together.

Speaker #2: In terms of our NT deployment, that is going on right now. So in terms of the network quality, network performance, and then also the potential of the future monetization opportunities for both consumer and enterprise.

Speaker #2: So that's why we are doing it. In terms of, I think you asked about the scale probably. I think we are looking at more than 50% of the coverage that we should be able to complete at by the end of the year.

Speaker #2: In terms of having 5G SA deployed, as part of that, we need to work with Apple, right? So when we say we want to enable 5G SA, Apple needs to kind of certify, and then you need to show and demonstrate that you have it—it's not like you are just doing a POC and those kinds of things.

Chee Ching: Part of that, we need to work with Apple, right? When we say we want to enable the 5G SA, Apple needs to certify, and then you need to show, demonstrate if now you're just doing a POC and those kind of things. I think more than 50% of coverage is what we are looking at for this year, if I remember it correctly.

Speaker #2: So, I think more than 50% coverage is what we are looking at for this year, if I remember correctly.

Speaker #3: Thank you.

Ranjan Sharma: Thank you.

Speaker #2: Sure.

Chee Ching: Sure.

Speaker #1: Next one, Sigrid Chu, JP Morgan. Go ahead, please.

Operator: Next one, Sigrid Chiu, JP Morgan. Go ahead, please.

Sigrid Chiu: Hi. Thank you, management. I have about four to five questions. Apologies in advance. Should I ask them all together or should I ask them one by one?

Sigrid Qiu: Hi. Thank you, management. I have about four to five questions. Apologies in advance. Should I ask them all together or should I ask them one by one?

Speaker #4: Hi. Thank you, management. I have about four to five questions—apologies in advance. Should I ask them all together, or should I ask them one by one?

Chee Ching: Well, either way. Well, it depends. Let's hear your first question.

Speaker #2: Well, either way. Well, it depends. Let's hear your first question, then we'll see.

Sigrid Chiu: That's it.

Sigrid Qiu: That's it.

Chee Ching: We'll see.

Speaker #4: Okay, sure, sure. Yeah. So, maybe let me just take it one by one. My first few questions are about the ICT segment. Firstly, could you just give us a sense of the 103% year-on-year growth in the included contract value?

Sigrid Chiu: Okay. Sure. Yeah. Maybe let me just take it one by one. My first few questions are about the ICT segment. Firstly, could you just give us a sense of the 103% year-on-year group's contract value growth? What are the project specifics of these contract values?

Sigrid Qiu: Okay. Sure. Yeah. Maybe let me just take it one by one. My first few questions are about the ICT segment. Firstly, could you just give us a sense of the 103% year-on-year group's contract value growth? What are the project specifics of these contract values?

Speaker #4: What would be the project specifics of this contract value?

Speaker #2: Okay. So you were asking about the ICT revenue growth specifically—what kind of projects they are, and what is the contract value, is that correct?

Chee Ching: Okay. You were asking about the ICT revenue growth and then specifically what kind of project they are and the contract value? Is that?

Speaker #4: So, specifically for the new contract that we signed in the first half and second quarter, what?

Sigrid Chiu: Specifically for the new contract that we signed in H1 and Q2.

Sigrid Qiu: Specifically for the new contract that we signed in H1 and Q2.

Chee Ching: What? Contract value? Yeah. Should we read that? Yeah, we actually look at for the H1, I think more than TWD 8 billion that we have accumulated. We got more in July. Yeah, for cut off at the end of June, it's more than TWD 8 billion. Okay. For ICT, we have four major concentration areas. The first one is telecom-based SI, the second one is Smart City, the third one is Smart Health, and the fourth one is digital transformation service. I think in the Smart City and digital transformation service, in particular, we got quite a few contracts from the government, and then those numbers are all big ones.

Speaker #2: Contract value, yeah. So should we release that? Yeah. We actually look at for the first half, I think more than 8 billion. More than 8 billion.

Speaker #2: That we have accumulated, and we got more in July. But then, yeah, for cut-off at the end of June, it's more than $8 billion.

Speaker #2: Okay? And then, so for ICT, we have four major concentration areas. The first one is telecom-based SI, and then the second one is smart city.

Speaker #2: The third one is Smart Health. And the fourth one is Digital Transformation Service. So, I think in the Smart City and Digital Transformation Service, in particular, we got quite a few contracts from the government.

Speaker #2: And then those numbers are all big ones.

Sigrid Chiu: Okay. Thank you. My second question is about the AI project delivery that you mentioned towards the end of your presentation. Could you let us know how much of our ICT revenue right now comes from AI-related projects? For the AI-related projects, are we seeing any margin difference from the rest of the ICT projects?

Sigrid Qiu: Okay. Thank you. My second question is about the AI project delivery that you mentioned towards the end of your presentation. Could you let us know how much of our ICT revenue right now comes from AI-related projects? For the AI-related projects, are we seeing any margin difference from the rest of the ICT projects?

Speaker #4: Okay, thank you. And my second question is about the AI project delivery that you mentioned towards the end of your presentation. Could you let us know how much of our ICT revenue right now comes from AI-related projects?

Speaker #4: And for the AI-related projects, are we seeing any margin difference from the rest of the ICT projects?

Speaker #2: Okay. Actually, I don't think we have a KPI or that we specifically do that calculation there. But I think I can answer.

Chee Ching: Okay. I don't think we have a KPI, or we have specifically done that calculation there. I think I can answer. In terms of AI-related. I know a lot of companies talk about AI-related. This statement could have a lot of difference. What I'm talking about here, I can tell you very specifically as we are the licensed solution provider for Microsoft. On one hand, we sell Microsoft service, the Microsoft 365, for example, and also Microsoft Azure. Those have been there, but they got even more popular because the GenAI, the OpenAI association with Microsoft. Microsoft recently has even opened up their AI-related capabilities in terms of the sourcing. We see all that. When we do this digital transformation, it's not just about selling the license.

Speaker #2: So, in terms of the AI-related, right— and I know a lot of companies talk about AI-related. This statement could have a lot of different meanings, right?

Speaker #2: And then so what I'm talking about here, I can tell you very specifically, as we are the licensed solution provider for Microsoft. And then so on one hand, we sell Microsoft service, the M365, for example.

Speaker #2: And also Azure. But then those have been there. But then they got even more popular because the Gen AI, the OpenAI Association, with Microsoft.

Speaker #2: And Microsoft recently has even opened up their AI-related capabilities, and then in terms of the sourcing, we see all that. But then, when we do this digital transformation, it's not just about selling the license.

Chee Ching: More importantly is to make the customer see the value of getting these license capabilities. How we help them adopt AI, also how we help them with AI tooling or AI capabilities. Now they have their fingers on, to create some applications for them in terms of helping them either with a productivity improvement or an error detection. That is the service, the AI adoption and the AI transformation service we provide on top of the license selling. The total revenue here, because with the license, of course, that is the base. All that other service, that is what's provided by my engineers. This is also, if you have heard the term FDE, the Forward Delivery Engineering.

Speaker #2: More importantly, it is to make the customers see the value of getting these licensed capabilities. And then, how we help them adopt AI, and also how we help them with the AI tooling or AI capabilities.

Speaker #2: Now they have their fingers on, and then to make, and then to create some applications for them in terms of helping them either with, like, productivity improvement or, like, error detection.

Speaker #2: So that is the AI adoption and AI transformation service we provide on top of the license selling. So the total revenue here, because with the license, of course, that is kind of like the base.

Speaker #2: But all that other service, that is what's provided by my engineers. And this is also, if you have heard the term FDE, the forward delivery engineering.

Speaker #2: So, this is the professional understanding the tooling and working with the clients, and then helping them use the AI tool to solve their problems.

Chee Ching: This is the professional, understand the tooling and working with the client, and help them using the AI tool to solve their problems. This is what my team does on top of selling the licenses. Licenses themselves don't sell. It's what the capability that they can create, the value they can create for the client that will sell. My team sells that. That margin will be relatively high because the cost of goods sold is low. It's my human capital and talent. Okay?

Speaker #2: So this is what my team does on top of selling the licenses. Because licenses themselves don't sell—it's the capability that they can create, the value they can create for the clients.

Speaker #2: That was sell. And my team sells that. So that margin will be relatively high, because the cost of goods sold is low. It's my capital, my human capital.

Speaker #2: And talent. Okay?

Speaker #4: Sure. Thank you. That's very helpful. And the last question. Regarding ICT is?

Sigrid Chiu: Sure. Thank you. That's very helpful. The last question regarding ICT is-

Sigrid Qiu: Sure. Thank you. That's very helpful. The last question regarding ICT is-

Chee Ching: I actually can give you another piece of information if I didn't mention it earlier. Just this area, the revenue growth for H1 is 50%. We definitely see the momentum that is going really strong in this AI-driven cloud demand and the AI transformation service. We see ourselves as our clients' AI transformation partners.

Speaker #2: I actually can give you another piece of information if I didn't mention it earlier. So just this area, the revenue growth for the first half is 50%.

Speaker #2: So we definitely see the momentum. That is going really strong in this AI-driven cloud demand and the AI transformation service. We see ourselves as our clients' AI transformation partners.

Sigrid Chiu: Got it. Thank you very much for that. My last question regarding the ICT segment is, could you give us a sense of just the margin of our overall ICT segment? As the ICT contribution percentage to group revenue steadily increases, what's our view on the group EBITDA margin going forward?

Sigrid Qiu: Got it. Thank you very much for that. My last question regarding the ICT segment is, could you give us a sense of just the margin of our overall ICT segment? As the ICT contribution percentage to group revenue steadily increases, what's our view on the group EBITDA margin going forward?

Speaker #4: Got it. Thank you very much for that. And my last question regarding the ICT segment is, could you give us a sense of just the margin of our overall ICT segment?

Speaker #4: And as the ICT contribution percentage to gross revenue steadily increases, what's our view on the group EBITDA margin going forward?

Speaker #2: So, you're talking about smart city, right? You're asking about smart city? No? Overall? Oh, okay.

Chee Ching: You're talking about Smart City, right? You're asking Smart City?

Sigrid Chiu: No, overall ICT.

Sigrid Qiu: No, overall ICT.

Chee Ching: Oh, okay.

Sigrid Chiu: Yeah, overall ICT.

Sigrid Qiu: Yeah, overall ICT.

Speaker #4: Yeah. Overall ICT.

Speaker #2: Oh, if it's overall ICT. So it is about 20%. I think it's more than 20. But then between 20 and 25. So it depends on the portfolio.

Chee Ching: If it's overall ICT, it is about 20%. I think it's more than 20%, between 20% and 25%. It depends on the portfolio. Every quarter it changes a little bit.

Speaker #2: So every quarter, it changes a little bit.

Sigrid Chiu: As ICT revenue contribution as a percentage of group revenue steadily increases, what do we think about the overall group margin going forward?

Sigrid Qiu: As ICT revenue contribution as a percentage of group revenue steadily increases, what do we think about the overall group margin going forward?

Speaker #4: As ICT revenue contribution as a percentage of group revenue steadily increases, what do we think about the overall group margin going forward?

Speaker #2: So as you can look at it, so the overall is like in 33, 35. Yeah, 35.8. My EBITDA margin is 35.8%. For the first half.

Chee Ching: You can look at it. The overall is like in 33, 35. 35.8. My EBITDA margin is 35.8%. For H1. I actually showed it on the chart. If you look at it later, you can see that.

Speaker #2: Yeah. I actually showed it on the chart. If you look at it later, you can see that.

Speaker #4: Okay. And my last question is on KPAG. We have plans to utilize this in the loan and also Leo satellite services. And I think at the start of the year, we also got it for actually higher KPAGs for 2026.

Sigrid Chiu: Okay. My last question is on CapEx. We have plans to build out 5G SA and also LEO satellite services. I think at the start of the year, we also guided for actually higher CapEx for 2026. I think for H1 right now, we're spending the same amount as to last year. Can I check what's the reason behind that? Will the bulk of CapEx come in H2?

Sigrid Qiu: Okay. My last question is on CapEx. We have plans to build out 5G SA and also LEO satellite services. I think at the start of the year, we also guided for actually higher CapEx for 2026. I think for H1 right now, we're spending the same amount as to last year. Can I check what's the reason behind that? Will the bulk of CapEx come in H2?

Speaker #4: But I think for the first half right now, we're spending about the same amount as last year. Can I share the reason behind that?

Speaker #4: And will the bulk of KPAGs come in the second half?

Speaker #2: Oh. Well, some of these are like a when the POs are placed and also for us to really pay them, we have to complete the testing and all that.

Chee Ching: Well, some of these are when the POs are placed, and also for us to really pay them, we have to complete the testing and all that. The CapEx, the realization will be showing in H2. You will see more of that. Actually, we had our core meeting today. We just passed another additional TWD 1 billion, right? Almost. We have additional CapEx requests that were approved this morning by our board. Actually, the CapEx number will be a little bit higher.

Speaker #2: So the KPAGs' realization will be showing in the second half. You will see more of that. And actually, we had our fourth meeting today.

Speaker #2: We just passed another, like, additional $1 billion. Right? Almost. So, we have an additional KPAGs request that was approved this morning by our board.

Speaker #2: So actually, the KPAGs number will be a little bit higher.

Speaker #4: Okay, thank you very much. I'll jump back in the queue.

Sigrid Chiu: Okay. Thank you very much. I'll jump back in the queue.

Sigrid Qiu: Okay. Thank you very much. I'll jump back in the queue.

Speaker #1: Thank you. If you would like to ask a question, please press the star key and number one on your telephone keypad. Thank you. Ladies and gentlemen, we are now in the question and answer session.

Operator: Thank you. If you would like to ask a question, please press star key and number one on your telephone keypad. Thank you. Ladies and gentlemen, we are now in question and answer session. If you would like to ask the question, please press star key and number one on your keypad. Thank you. As a reminder, please press star one on your keypad if you would like to ask the question. Thank you. Okay, we still have it. The next one from Sigrid Chiu, J.P. Morgan. Thank you. Go ahead, please.

Speaker #1: If you would like to ask a question, please press the star key and the number one on your keypad. Thank you. As a reminder, please press star one on your keypad if you would like to ask a question.

Speaker #1: Thank you. Okay, we still have the next one from Citi, J.P. Morgan. Thank you. Go ahead, please.

Sigrid Chiu: Hi. I'll just follow up with one question. President Chiu, could you give us an update on our conversation with Amazon on the LEO satellite service? Could you also give us just a sense of how the partnership model would be like, and what is the revenue potential for LEO service in Taiwan, please?

Sigrid Qiu: Hi. I'll just follow up with one question. President Chiu, could you give us an update on our conversation with Amazon on the LEO satellite service? Could you also give us just a sense of how the partnership model would be like, and what is the revenue potential for LEO service in Taiwan, please?

Speaker #4: Hi. Just follow up with one question. President Chu, could you give us an update of our conversation with Amazon on the Leo satellite service?

Speaker #4: And could you also give us just a sense of how the partnership model would look like, and what is the revenue potential for the Leo service in Taiwan, please?

Speaker #2: Well, first of all, some of the information you asked is really under NDA. So, in terms of the contract agreement, I won't be able to disclose that.

Chee Ching: Well, first of all, some of the information you asked is really NDA. We have in terms of a contract agreement. I won't be able to disclose that. What I can tell you is, in addition to having the kickoff meeting, as I have stated this before in public, to be able to commercially launch this service, there are several gates that we have to pass with our central government ministries, MODA, NCC, and the CIB. We already have passed three of them, three out of the six. That is progressing well. A couple of them needed the support or approval from NCC, and we were able to acquire or secure the approval from the NCC before the commission expired. None of the commissioners are available now since the new candidates haven't been approved by our Congress.

Speaker #2: But what I can tell you is in addition to having the kickoff meeting as I have stated this before, in public, yeah, to be able to commercial launch the service, there are several gates that we have to pass.

Speaker #2: With our central government ministries mode NCC and CIB, so but then we already have passed three of them, three out of the six. So that is progressing well.

Speaker #2: A couple of them needed support or approval from the NCC, and we were able to acquire or secure approval from the NCC before the commission expired.

Speaker #2: None of the commissioners are available now since the new candidates haven't been approved. By our Congress. So we are making good progress there. And we already completed three out of the six gates that is progressing well.

Chee Ching: We are making good progress there, and we already completed three out of the six gates. That is progressing well. In terms of the revenue and all that, all I can say is if this is not something that we see reasonable profit or we don't see big enough revenue opportunities there, that we won't just dive in necessarily. Those have to be reasonable. That goes without saying. Any more details, that's really within the contract, I cannot disclose it.

Speaker #2: And in terms of the revenue and all that, all I can say is if this is not something that we see reasonable profit or reasonable or we don't see the revenue big enough revenue opportunities there that we won't just dive in necessarily.

Speaker #2: So those have to be reasonable. That goes without really within the contract and I cannot disclose it.

Sigrid Chiu: Yes, no problem. Thank you.

Sigrid Qiu: Yes, no problem. Thank you.

Speaker #4: Yeah. No problem. Thank you.

Chee Ching: Sure.

Speaker #2: Sure.

Speaker #1: Thank you. There are currently no questions, so I'll pass the call back to Mr. Gary Lai. Gary, please proceed.

Operator: Thank you. There are currently no questions. I'll pass the call back to Mr. Gary Lai. Gary, please proceed.

Speaker #3: Okay. Thank you, everybody, for attending our second quarter 2026 results conference call.

Gary Lai: Okay. Thank you, everybody, to attend our Q2 2026 results conference call.

Chee Ching: They can always follow up with you if they have more questions afterwards.

Speaker #2: And they can always follow up with you if they have more questions afterwards.

Chee Ching: They can always follow up with you if they have more questions afterwards.

Speaker #3: Yes, please. Thank you. See you next quarter. Bye-bye.

Gary Lai: Yes, please. Thank you.

Chee Ching: Thank you, all.

Gary Lai: See you next quarter. Bye-bye.

Speaker #1: Thank you. Ladies and gentlemen, we thank you for your participation in Far Eastone's conference. There will be a webcast replay available within an hour. Please visit www.fareastone.com.tw.

Operator: Thank you. Ladies and gentlemen, we thank you for your participation in Far Eastone's conference. There will be a webcast replay within an hour. Please visit www.fareastone.com.tw under the investor relations section. You may now disconnect. Thank you again. Goodbye.

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Q2 2026 Far Eastone Telecommunications Co Ltd Earnings Call

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